Understanding This Market Signal: A Guide To Profiting Today
The consumer is not spending like they used to. This is fact and can be seen in the economic numbers as well as the earnings reports from companies in recent days. What investors need to know is that the fact that consumers are not spending now is nothing different than over the last few years. There has been no immediate change in consumer habits this quarter or in 2014. So why are companies like The Coca-Cola Company (NYSE:KO), United Technologies Corporation (NYSE:UTX) and McDonald’s Corporation (NYSE:MCD) all trading down on earnings? The answer is simple. Since the economy collapsed in 2008-9, companies have used many tactics to simulate earnings growth. The first was job cuts. By cutting thousands of jobs, most publicly traded companies were able to show great earnings numbers. While there was no real growth underneath these numbers, it still helped lower the P/E ratio on these companies and the S&P 500. Another tactic these companies have used in the past was stock buyback programs. By eliminating the shares in the company, earnings PER SHARE are boosted artificially. Companies have been high on buybacks because money is extremely cheap due to the Federal Reserve’s policies. As these tactics are accomplished, companies lose their bullets in the gun. What we are seeing now and will see in the next few years is a slowing of earnings growth because these tactics have been used up. Earnings growth will slow even more when interest rates (cheap money) head higher.
Earnings that disappoint Wall Street will continue. Charts that are at 52 week highs into earnings can be shorted in most cases. This trend will continue and investors will eventually realize the scam these companies have played over the last five years. Take the seven day free trial to the Research Center. Join other members who have made over 300% in 2014 already. See the audited track record here. Join today and profit for life.
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Chinese stocks are heating up in epic fashion as the U.S. stock market hits bumps on global stability worries. This is happening as U.S. equities become more and more over priced and recent economic data in China looks promising to investors. Leading the charge is Baidu Inc (NASDAQ:BIDU) trading at $197.13, +5.96 (3.12%). This is a new all-time high. While now is NOT the time to buy BIDU, there are other mid-cap and small-cap Chinese ADR’s that will catch fire as the momentum spreads. Stocks like E Commerce China Dangdang Inc (NYSE:DANG) and Renren Inc (NYSE:RENN) are two Chinese plays to watch and the price action on SINA Corp (NASDAQ:SINA) today looks very promising. These China plays may be in the beginning stages of big moves in the next few weeks and should be on alert. In addition, this run should be sustainable in Chinese names into the Alibaba IPO (early August) and is quite possibly one of the reasons many ADR’s are beginning to surge higher.
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Watch this video as Kristof of the Elite Round Table reveals a quick trade for you to take on the SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA). Join the free email list of the Elite Round Table here and stay on top of all the market moving action for FREE!
The stock market has been on a roll again this year. It has moved up on a seemingly undeterred ascent all year, aside from a bit of a hiccup it suffered in January. Whatever has been thrown at these markets, they always seem to shrug it off as people come in and buy any short-lived dips. One sector that has not really participated in the party has been the defense sector. Names like Northrop Grumman Corporation (NYSE:NOC) have just moved sideways, while the S&P 500 has kept climbing. Is this trend about to change?
You are probably thinking to yourself “why would this guy look at this under performing sector?” The markets can go on pretending for so long, but at some point they will have come to terms with geo-political events. Since the beginning of the year there has been tensions brewing with Russia and the U.S. While Obama has tried to handle such situations with diplomacy, that will only work for so long, before the US has to take military action (hopefully not). With the unfortunate tragedy of Malaysian Airlines flight MH17 being shot down. One has to wonder if this is the catalyst that will force the U.S. government to act militarily.
This event is tragic in nature and there has been loss of human life. However, the world will still go on and markets will move. That is why I have focused on the defense sector and Northrop Grumman Corporation (NYSE:NOC), as these companies in this sector could see a boost in share price if tensions escalate further. Technically speaking, you could say this name has been basing all year and is building energy to push higher. If the U.S. does use military action, that could be the spark that moves Northrop Grumman Corporation (NYSE:NOC) shares higher.
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